Visible Hand Leads Triple Strengths
By Kim Tae-gyu
Staff Reporter
As the mystical force of the market, the so-called ``Invisible Hand,'' is not working properly due to the lingering financial crisis, the mandate of the government, dubbed the ``Visible Hand,'' has taken its place.
And the result seems to be good. On top of making a sinking economy float, experts say the Visible Hand is responsible for the nation's triple strengths of late on stocks, bonds and foreign exchange markets.
``Recent rallies in the local stock market are entirely attributable to the governments of the United States and Korea. They also explain why the bond and foreign exchange markets have stabilized,'' Samsung Securities analyst Hwang Geum-dan said Tuesday.
``The bullish run started thanks to the U.S. government and has been maintained by the Korean administration. When the Invisible Hand struggles, the Visible Hand has to play a pivotal role and the market appears to put credence on the Visible Hand,'' she said.
Since last week, when the incoming Barack Obama administration hinted at stimulus packages bigger than expected, domestic share prices and foreign exchange went up in six out of seven sessions.
The Korean government and the Bank of Korea further spurred the hard-earned momentum by announcing huge stimulus plans and a record 1-percent cut in the benchmark rate, respectively.
Over the mini-rally starting Dec. 8, the benchmark KOSPI gained 13 percent through Tuesday while the tech-loaded Kosdaq added 11.8 percent. The foreign exchange rate was also stabilized over the seven-session period from 1,475.5 won per dollar to 1,349.6 won.
Prof. Lee Jae-woong at Sungkyunkwan University concurs on the importance of the Visible Hand during hard times.
``Proactive government intervention will be necessary for years to come. When the market suffers from a crisis, the Visible Hand has to step in,'' Lee said.
``Such intervention seems to be responsible for the strong markets of late. But when things get back on track, the government should let the Invisible Hand come to the fore,'' he said.
Tuesday Financial Market
In the meantime, the local stock market ended in positive territory despite early tumbles with the KOSPI edging up 3.37 points, or 0.29 percent, to close at 1,161.56.
The junior Kosdaq inched up 2.71 points, or 0.81 percent, to 337.85 and the Korean currency also appreciated 1.27 percent against the greenback to end at 1,349.6 won per dollar.
``We were afraid that the stock market would lose today since the U.S. share prices headed south overnight,'' said Lawrence Kim, an economist at Woori Securities. The Down Jones Industrial Average slipped 0.75 percent Monday and the tech-filled Nasdaq Composite Index dipped 2.1 percent.
``The woes caused share prices to plunge to as low as 1,137.05 in the morning session. Yet, the positive outlooks on the economy boosted by Monday's stimulus plan made people snap up stocks,'' he said.
On Monday, the government unveiled a plan to pump 14 trillion won over the next four years into projects developing the country's four major rivers, as part of efforts to revive regional economies.
The struggling memory chipmaker Hynix Semiconductor jumped 9.23 percent to 6,980 won but tech bellwether Samsung Electronics went down 3.18 percent to 457,000 won.
The country's foremost automaker Hyundai Motor rose 5.56 percent to 47,500 won and its sister company Kia Motors added 13.59 percent to close at 8,190 won.
A total of 618.36 million shares changed hands worth 6.71 trillion won and winners outpaced losers by 476 by 350 with 32 shares reaching their daily limit up of 15 percent.